Revenues generated by a new fad product are forecast as follows: Year Revenues 1- $40,000 2- 30,000 3- 20,000 4 -10,000 Thereafter 0

Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $53,000 in plant and equipment.

a. What is the initial investment in the product?

b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firms tax rate is 20%. What are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.

c- If the opoostunity cost of capital is 12%, what is the projects NPV?

d- what is project IRR?